Press Release
July 22, 2006


Senate Minority Leader Aquilino Pimentel Jr. (PDP-Laban) today proposed the restructuring of the distribution of the Internal Revenue Allotment (IRA) to local government units (LGUs) by increasing the allocation for municipalities and cutting down the share of the cities.

Pimentel said the proposal will put more resources at the disposal of about 1,500 municipalities and discourage them from being converted into cities to beef up their share from the internal revenue collection.

Based on his proposal, the formula for sharing in the national taxes will be charged by raising the share of municipalities from the current 34 percent to 36 percent while reducing the share of cities from 23 percent to 21 percent.

The share of provinces from the IRA will be maintained at 23 percent and barangays, 20 percent.

Too many municipalities are aspiring to be elevated to citihood status, obviously in their desire to get a bigger allocation of IRA. If we allow that to happen, there may be no more towns left and all we will have are cities. But if we increase the share of the municipalities from the financial pie, that desire to become cities will be diminished, Pimentel said.

The lone senator from Mindanao put forward this proposal following the suggestion of the National Economic and Development Authority (NEDA) to revise the apportioning of the IRA among the LGUs on the basis of financial capacity.

As stated by Socio-Economic Planning Secretary Romulo Neri, NEDA director general, the wealthier provinces, cities or municipalities will be entitled to less IRA so that more funds can be given to those that are earning less. This will solve the perennial complaint of poor LGUs of lack of funds to deliver basic services.

The proposals presented by Pimentel and NEDA chief Neri both require an amendment to the Local Government Code (Republic Act 7160).

Under the Code, the size of the land area and population of the LGUs are among the factors considered in computing their IRA share.

Pimentel said that while the NEDA proposal may have its merits, it is bound to face stiff resistance from the LGUs that will be affected by the IRA reduction.

To prevent the unwarranted mushrooming of cities, the opposition senator is proposing the adoption of stricter criteria for the conversion of municipalities into cities.

At present, a municipality may be converted into a component city if it has an annual income of P100 million.

Pimentel, principal author of the Local Government Code, has been proposing that the share of LGUs from government income should go beyond internal revenue and must include all national taxes. Corollary to this, he said the share of LGUs from the national tax collection should be raised from the current 40 percent to 50 percent to enable them to cope with expanded responsibilities brought about by the devolution of powers and functions from the central government.

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